Out-of-Network Health Benefits-New Jersey Courts Take A Stand

By Bonny Rafel

Medical providers often serve as intermediaries between their patients and insurance carriers in order to secure payment for their services. This spares the patient the burden of negotiating the waters of insurer red-tape. The recent District of New Jersey case of Cohen v. Independence Blue Cross makes clear that, in the case of an out-of- network provider, the language in an insurance policy can make all the difference in determining the efficacy of this intermediary role.

In Cohen, the insured underwent spinal surgery by an out-of-network physician, and then issued the surgeon an assignment of benefits under his health insurance plan. The defendants (the insurer, the plan and the plan administrator) paid a fraction of the doctor’s bill directly to the insured, but refused to pay the rest of the doctor’s bill, which was $143,626.00. This fractional amount represented a substantially higher patient obligation for out-of-network services. The defendants grounded their non-payment on an anti-assignment clause in the insured’s policy, which read, in pertinent part, “The right of a Covered Person to receive benefit payments under this coverage is personal to the Covered Person and is not assignable in whole or in part to any person, Hospital, or other entity nor may benefits of this coverage be transferred.”

The Court found that the clause was not preempted by ERISA, and distinguished Neuner v. Horizon Blue Cross Blue Shield of New Jersey, 301 B.R. 662 (Bankr D.N.J. 2003) (providers have standing to demand payment in the absence of an anti-assignment clause), and Ambulatory Surgical Center of New Jersey v. Horizon Healthcare Services, 2008 U.S. Dist. LEXIS 13370 (D.N.J. Feb. 21, 2008) (finding that providers could be valid assignees, without addressing whether ERISA permits anti-assignment clauses in insurance contracts). Additionally, the defendants had not waived their right to enforce the anti-assignment clause by corresponding with the doctor directly during the claim process, because Pennsylvania State law, which governed that issue, required a “clear, unequivocal and decisive act” of waiver, which the defendants had not shown.

The Court did not address the doctor’s recourse to payment of his full bill. Therefore, the combination of this provision with the procurement of out-of-network services may have created a precarious situation for both the doctor and the insurer in the Cohen case.

Consumers in need of medical care welcome the assistance of their doctors to obtain payment of their medical bills. However, the Cohen case makes clear that there can be problems attendant to placing medical providers in this role. Insureds need to check the language in their policies, as they in fact may not be able to assign their rights to benefits to their doctors.

Fighting insurance company denials can be stressful, but we at Bonny G. Rafel can help.